Thursday 2 April 2020 12:02 pm

Formula One's 2020 outlook downgraded to negative by Moody's

The outlook for Formula One has been downgraded by Moody’s to negative in light of the disruption caused by the coronavirus pandemic to its 2020 race calendar.

Formula One has cancelled its Australia and Monaco grand prix races and postponed six races scheduled between March and early June 2020.

Moody’s said the disruption would lead to “weakened earnings and cash flow generation, higher leverage and liquidity erosion in 2020”.

In a statement, the ratings agency said: “The negative outlook reflects the high levels of uncertainty over the 2020 race season and Moody’s expectations of increased leverage and weakened liquidity in 2020.

“This results in risks that the company may not be able to restore its Moody’s-adjusted leverage to below 7x within around one-two years following the coronavirus crisis.”

However, the racing association retained its B2 corporate family rating (CFR) and its B2-PD probability of default rating.

The retention of these ratings was due to “strong liquidity headroom and low capital spending”, a “track record” of strengthening its franchise and increasing fan base and “high earnings visibility and strong cash flow conversion”.

Moody’s said: “Formula One has strong liquidity and a sufficiently flexible cost base to manage through a severely curtailed 2020 season, which Moody’s consider would likely be able to support a full cancellation.

“As of 31 December 2019, Formula One had substantial liquidity headroom of around $900 million, comprising $400 million cash balance and $500 million undrawn committed revolving credit facility.

“Moody’s expects this to be sufficient to absorb cash outflows from potential refunds of advance payments from promoters, sponsors and broadcasters, team payments, other overheads and interest costs in the event that the 2020 season is cancelled.”